UAE’s Masdar seeks first-mover advantage in green hydrogen emerging market

Over the past fifteen years, Abu Dhabi’s Masdar has become one of the world’s largest developers of renewable energy projects. Now, as the United Arab Emirates prepares to host the next UN climate summit, COP28, at the end of the year, it is venturing into a whole new business area – green hydrogen.

Hydrogen is seen as key to achieving global net-zero emissions targets. It can be used in a wide range of applications including power generation, energy storage, transportation (especially heavy-duty transportation such as marine and trucking). It can also be used to make sustainable aviation fuel (SAF), and most importantly, it provides a way to decarbonize “hard to abate” industries such as steel, aluminum and cement, where only It is impossible to use renewable energy, as well as other high-carbon industries such as fertilizers.

“Certain industries need ‘green molecules’ to decarbonize (rather than green electricity),” said Dr Faye Al Hersh, strategic technologist at Masdar, during the Abu Dhabi Sustainability Week hosted by the company. For steel and cement, CO2 is part of the production process and not just a product of the energy used, but production can be decarbonized through the use of hydrogen.

While current production methods for removing hydrogen from methane gas (known as gray hydrogen) are carbon-intensive, production by capturing carbon and storing it (blue hydrogen) or by using renewable electricity and electrolyzers is known as green hydrogen gas.

It is this sector that Masdar hopes to help create following capital infusions from Abu Dhabi national energy company Taqa, Mubadala Investment Company and Abu Dhabi national oil company ADNOC.

According to Al Hersh, Masdar hopes to both export hydrogen from the UAE and build facilities in other markets. It plans to produce 1 million tonnes per year by 2030 and reach a target of 100GW of renewable energy capacity by the same date. The largest markets for green hydrogen are expected to be Europe, where the production of green hydrogen is encouraged over blue hydrogen, and the United States, due to incentives for hydrogen production in the recently passed inflation reduction bill. Meanwhile, Asian markets including South Korea and Japan are looking to use green ammonia in power stations and industry.

In terms of sectors, both the aviation and maritime sectors will be subject to decarbonisation regulations which will significantly increase their demand for cleaner fuels. Hydrogen can be used in aircraft in its pure form or to create SAF, which can be used as a “drop-in” fuel to replace conventional jet fuel.

However, there are still many issues to be resolved throughout the value chain, including the best way to transport hydrogen. Pure hydrogen is difficult to store and transport. But it can be converted into other derivatives, such as combined with nitrogen to make ammonia, which can be used as a fuel in power stations, or methanol, which can be used as a shipping fuel. “It’s better to produce the hydrogen in the form the offtaker wants to use because it’s complicated to convert back to hydrogen,” Al Hersh said.

Currently, most projects require off-takers who are ready to pay a premium for green hydrogen, as the market is just getting started. The main cost of green hydrogen is the energy required to produce it, so cheap renewable energy is key to making projects commercially viable.

Another unresolved issue is the technology that will be used in the electrolyzer. The two main technologies are PEM (Proton Exchange Membrane) and basic, solid oxides are possible future options but are less mature than the other two. Nel Hydrogen says PEM electrolyzers may be better suited for small and decentralized projects, while alkaline equipment may be used for larger industrial projects. Due to a combination of technological improvements and economies of scale, the cost of electrolyzers will drop significantly over the next few years.

Masdar has announced early projects including a 200 MW green hydrogen plant in the UAE in partnership with Fertiglobe and Engie; with Siemens, TotalEnergies, Etihad Airways and Lufthansa, Marubeni Airlines and Khalifa University Collaborative projects for the production of hydrogen and SAF. The company is also developing projects in the UK, Egypt and Azerbaijan.

“Our aim is to leverage our footprint in existing projects and markets,” said Mohamed El Ramahi, the company’s executive director of green hydrogen. “We want to target at least a 15% market share of green hydrogen derivatives. We believe we can reduce the cost of hydrogen from $4 to $2 by 2030.”